US economy takes Olympic leap to add 3% to GDP
By Robin Harding in Washington
July 28, 2013 4:06 pm

US economic history will be rewritten this week, as the most far-reaching methodological changes in years will add the equivalent of a country the size of Belgium to output in the world’s largest economy.

The most important change by the Bureau of Economic Analysis, to be announced on Wednesday, will be to start counting spending on research, development and copyrights as investment, and reflect pension deficits for the first time. Combined they are expected to add 3 per cent to gross domestic product..

The changes – the Olympic Games of economic numbers, taking place once every five years on average – is aimed at more accurately reflecting the modern economy and will make the US the first country to adopt a new international standard.

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times in an interview in April.

The scope of the revisions will keep economists busy for months. For example, politically sensitive figures on the size and growth of the US government will change, because the revisions have no effect on past tax revenues. At a time when Republicans argue the growth of federal government is out of control, the revisions are likely to lower federal spending as a share of GDP by half a percentage point. They should also lower federal debt as a share of GDP by about 2 percentage points from 73 per cent in 2012.

But there are also two other layers of GDP data out on Wednesday, of which the shiniest and most visible will be the least important.

The top layer is the first estimate of second-quarter growth. It is generally expected to be miserable, with the consensus estimate at an annualized rise of 1.1 per cent. Some forecasts, such as that by Dean Maki of Barclays Capital in New York, are as low as 0.5 per cent.